The Noise is Deafening

There is so much noise in the first quarter earnings reports that it is difficult at first to get a good evaluation as to how companies are doing.  Some of the noise is weather related, with charges to account for extra costs as a result of the terrible winter conditions during the quarter. Then there are charges for excessive foreign currency shifts.  This was especially the case for several South American currencies, like Venezuela’s, Brazil’s, and Argentina’s in which values collapsed versus out U.S. dollar.  Then there are the usual charges for merger related costs, litigation, and business reserves.

So what do the earnings during this quarter actually tell us?  Business results continue to improve.  Revenues look to be growing at about 3% and earnings at about the same pace.  This is a broad average and overlooks a lot of variability.  Three percent is nothing great, but given tough business conditions, not too bad.  It is reasonable to expect a snap-back in activity now that spring has finally arrived.  This is what we believe will happen.  In the meantime, we believe companies have done a remarkable job continuing to make progress during a difficult time.  Stay steady my friends.